There was an incredibly long discussion on the Etsy forums about this. The comments were almost uniformly opposed to the idea, and explained the very many things that Etsy was not taking into account. Etsy promised over and over to address everything brought up in that thread, and didn’t. Basically they ended up highlighting the comments that provided workarounds for a few of the minor issues, and ignored the herd of elephants in the room. For example, numerous people pointed out that this policy could put them in violation of EU customs rules when shipping to Europe. No cogent reply.
My own main comment on it was that I wouldn’t actually mind offering free shipping on most of my things - which is to say folding in shipping costs - and could do it easily on most, if they would offer me the ability to make it free shipping to the Continental US rather than the entire US. I can fold in shipping that will allow me to send a table across the country by UPS, but as soon as someone in Alaska or Hawaii orders the same thing, shipping costs rise by about 150% and I’m losing something on the order of 20% of the sale price. But Etsy has no option for pricing shipping differently to the Continental US vs the disconnected states.